TRACE: See Support, Resistance, & Volatility for the S&P 500 | SpotGamma

0:06 [Music] Hello. It's great to have everybody with us. We'll just give a minute as the Zoom filter is working. Everybody in the room, thank you for being here. Hi Jayen, Pedro Luciano. Everybody's firing up. Reine familiar face. Good to see everybody. All right. Just looking at that Zoom number to stabilize.

0:54 Okay. All right. We're going to get started here. So, thanks for being with us today. Uh this is the fifth installment of the spot gamma sharpen your skills sessions. So, uh this is actually a blended session. It is targeted for subscribers, but we will be doing an intro at the beginning with Brent walking through how Trace works and making sure everybody has a good overview before we take questions and get into examples and look what's happening in today's market and all the fun things that Trace unveils around the S&P. So, uh, before I kick it over to Brent, again, this is our fifth installment. For those of you that are subscribers, all the previous sessions on our other products are available on the dashboard under the resources tab or all of these are available also under spotgamma.com/sharpenyousklls.

1:42 I'll drop that in the chat. So all within maybe 24 to 48 hours after we complete these sessions, those will be uploaded. For those of you that do have a lot going on today, uh the spotgama.com/sharpenyouklls will have these training videos. But if you want to ask questions, be live. Be here with us. We're glad you're here. Uh we'll go through all this now and show you how trace works. So uh for those of you that don't know me, I'm Matt Fox. I'm CEO of Spot Gamma and Brent's our founder and our our fearless leader. So I'll turn it over to him to do the overview on Trace. I'll be here on the chat also answering questions. But again, thanks for being with us, Brent. What's up everybody? Uh, good to see you all. Bring up the old screen share.

2:29 Uh, and thanks for the introduction, Matt. Uh, I could tell you that I am actually scared of many things like bad market data. Always very scary. All right. Uh, as Matt mentioned, we are going to talk about trace today. So, trace is going to be focused uh, the focus of this conversation. We've done a bunch of other uh sharpen your skills sessions and so this one on trace is one uh trace being one of our marquee tools uh being one of the things that spot gam subscribers most heavily utilize and then if we have a minute here at the end of the presentation I'll gladly share what's happening in the market right now because it's a great example of how uh trace can help everyone parse the real-time data first everything that we say here is uh not investment advice

3:14 consult a financial adviser etc etc So, why do options volumes matter so much? Uh, you spot gamer OGs out there will know that the options volumes have gone crazy over the last couple of years and the volumes continue to grow. In fact, just this past Friday was one of the largest zero DTE uh days ever. Uh, it was an article, a little post on Zero Hedge said that it was the largest notional traded for zero DTS ever. So, you know, we just keep seeing more and better and bigger and higher. And, you know, for those of us that track options volumes, that's great. Now, why is that great? Because the more options volumes that come into the market, the more impact we think uh that options have on the stock market. And obviously, if we're able to analyze and understand where all the options volumes are and where all the positions are, well,

4:00 that's great for us, right? So, on your left here, just to put this into context, is the options market volume. It's up about 150% from 2020 till about a month ago is when we snapped this uh this data. On the right you can see the equivalent in stock volume. It's only up about 30% and I would argue a chunk of that 30% gain in stock volume is due to hedging flows and we're going to talk about that here uh in a second. Obviously, April is just a a banger or fire, I think is what the kids say the these days. Uh of options volumes uh massive options volumes uh throughout all that kind of terrace liberation day uh spasms. So, uh that is the key thing to frame this all with right huge options volume hedging flows tied to those options positions is what becomes

4:45 uh leads those options flows become a driver of the stock market. Now at spot gamma we coined this term called positional analysis. Most of you are familiar with technical analysis of like let's see where the Fibonacci is and you know the moon setting and the moving average uh or the eight crosses the 5day or whatever it is right that's technical fundamental how many cars is Tesla going to sell this year or AMD didn't sell anything so the stock is way down today. Um but what we do is positional analysis and what that is is looking and seeing where big entities are positioned in this case typically market makers and then we try to forecast how those flows right those big positional flows are going to shift and that's going to drive price action and the great thing about doing this in the option space is we have all of this data

5:30 that tells us exactly where the positions are right open interest and we can use options modeling like advanced kind of black shores type equations to understand how these positions are likely to change in value and how the hedging flows related to these positions will shift and that gives us this insight that we have into positional analysis um to to help us forecast market direction. So before we get into this before we get into trace there's uh one important concept to understand here and that's the idea of positive gamma versus negative gamma. Now positive gamma when you have a positive gamma market it means that market makers are going to trade against price action. So if the market starts to rally what do they do? They sell stock. If the market starts to

6:17 sell off what do they do? They buy stock. And so when they do that and if their positions are big enough, what is that going to do? It's going to contract or constrict how much the market's going to move. Right? If you ever played one of those like finger traps like the harder you pull, right? The the the less movement you have. And it's sort of like the more hedging flow you have, well the less market can move in a really heavy positive gamut environment because those flows are selling the highs, right? And buying the dip. And that again keeps volatility tight. It keeps realized volatility tight. Now the opposite part or the opposite position there is a negative gamma position. And in that situation, what happens is dealers or market makers, they're chasing price. What does that mean? If the market starts to rally, it means I have to buy stock as a market maker to keep up. My

7:02 hedging dictates that I have to buy into higher markets. So, if I have to buy a ton of stock into a market that's rallying, the market's going to rally faster, right? That can create volatility, upside volatility. Same thing to the downside, right? If I'm in a negative gamma position and and the market starts to crash, I have to sell futures or sell stock to keep up. And if I'm big and I'm doing that, you know, every whatever 25 bips the market goes down, I got to sell another trunch of futures. I'm going to accelerate that downside with my hedging flows. So those are the two distinct patterns that we're looking for when we go to look at trace positive gamma versus negative gamma. Now, one thing is important to kind of understand here. Um, and if you're interested in sort of understanding a little bit more about this, we have a great video on uh uh the opex effect

7:50 excess returns. You can look at dealer hedging flows. There's a teach me with teach me like on five video there uh if if this gamma thing if you need a little more color on that. But understand negative gamma drives volatility. Positive gamma contracts volatility. So, what does this have to do with trace? Now, as we explain how trace works, what you see here is a heat map. Red in this case is selling flow or high volatility areas of the map. Blue is buying flows or lower relative volatility on the map. And so, if you can read a map, you can use this tool. What's actually driving the trace heat map is market data that comes in and then we analyze and process that market

8:35 data and it informs us what buyside entities are likely doing. Who's buy side? Hedge funds uh and retail traders in particular and we focus on that flow because we believe those are the flows that have to be hedged by market makers. So what we're showing you is the market maker depiction of what they have to do. So that shows up as red and blue on this map. And then on the left you get these bars. And the bars are showing you the specific strikes, puts in orange, excuse me, puts in blue, calls in orange. And that's showing you where the biggest positions are in the day. And you can toggle this and do a couple of other settings. But at the end of the day, what you're seeing here is support and resistance via the heat map, estimates of volatility via the heat map, right? Like how much should the market move, and then the strikes on the left are giving you specific levels,

9:21 right? So you can look at those as specific support and resistance strikes or levels. Okay. So on this map here, 5,500 is a huge level. And then to the downside, 5,400 is a huge level. And what do you see? The market moves through here. All of a sudden, the map turns more blue. It finds support. And then we rip back through this zone of high volatility, right? So it's very simple. Even if you don't want to get into the logic of okay, like what is the market maker doing? Don't quite understand. Oh, okay. Blue is support and resistance, red high volatility zone. Easy. So, how do we do this when we break into this a little bit more? And there's a couple of extra settings in here when we talk about supercharging your trading. But when you look at the S&P order flow right now, the last about month, over

10:07 60% of S&P index options volumes are tied to zero DTE trading. And so, what you see here in the map on the left side is we have this setting called zero DTE. And you toggle that back on and off. And that shows you where just zerodt positions are or where all positions are. Now what's interesting about gamma is gamma is highest for at the money options and gamma increases as we get closer to expiration. So what does that mean? That means that zerodte options have the most gamma. That means that zerodt options are likely what is in most control or has the highest impact on the spx order flow or the way the spx behaves over the course of a day. So with that, I would say that if you trade futures, if you trade spider options or stock, if you trade S&P options and you're not watching the zeroDT order

10:53 flow, you are missing 60% plus of the picture, right? So what you can do here and what you see here is a couple of different things, right? You can toggle some models. Uh we show you either delta, gamma, or charm. And all of those are related, right? but they're all showing you support and resistance zones. We give you this color heat map. And the reason that the heat map is so powerful obviously is because you're getting a stat statistical inference of how important this data is. Options trade all day long in all names. So if you don't have a context for how big or small that particular position is, then you kind of don't know what you're doing, right? So anytime you hover over the map here or you see a higher or more intense color, you're getting the data

11:38 that says, "Hey, guess what? This is like a 99th percentile. And if you're a spy gamer subscriber, you know I'm always talking about the 99th percentile strike. You're getting an understanding statistical I can't to say that word today. Statistical significance uh of how important that is because obviously look if you're looking at a position, you're saying, "Wow, look at this position here. It stands out." But that's like one of the smaller positions we had in the last two weeks. Then it doesn't really mean anything, right? We also overlay our key levels onto this heat map. And then there's this time slider. And the time slider is cool because you can go back and replay what happened. If you ever look at some of the best traders in the world, they do that homework, right? Market closes. It's kind of like when you're a professional basketball player, it's like you get, you know, you become a champion, they say in practice, right?

12:26 And shooting a thousand jump shots a day or whatever. It's like, well, if you want to go back and see what happened in the day and like how could have I improved that trade or what signal did I miss, you can replay the map and see exactly what happened. And what's fascinating is a lot of times the biggest jumps or biggest sh position shifts on the day right uh time to or sync with an intraday S&P position being closed. So in this case here again you see the OI by strike the time slider allows you to go back and forth. Now the map updates every 10 minutes intraday. So every 10 minutes the bars on this chart may change if positions changed and then the heat map is adjusting up and down obviously as the S&P 500 moves and then obviously as positions are shifting. So I want to go back one more slider

13:12 because I think this is a little bit easier to to explain a little bit extra about how the map is working. um what we're doing here and this is a moving picture but what we're doing here is we're saying what does the gamma look like or in this case the delta so let's just say this is the gamma map setting here today but what does the position look like if the S&P rallies higher and so you can see up here it's red what does that mean well that means it's a higher volatility zone or if you're looking at this delta map it means that there is more for the dealer to sell right so it's a projection on what happens if the market rallies up up higher, right? What happens if the market declines right here? The bright blue tells us that futures may have to be bought. So the closer we get to this downside, the more blue the map gets is

13:59 a inference of more dealer hedging flows coming into the market. Right? So we're projecting higher and lower in price what happens and then also what's happening over the course of the day. Remember I said before for zerodt options, gamma is highest for at the money options and gamma increases as we get closer to the end of the day. So when you get to the end of the day, you'll often see colors that get to be very intense like here because a zerod option has an extreme amount of gamma at 4:00, right? But that's only relevant if you're near the strike, right? So if if you have a ton of positions at 5,500 and we're closing at 5,400, well, obviously that 5500 strike has no gamma, right? super far out of the money with a minute left in the day. It doesn't have any value. So the map is projecting right

14:44 these if then scenarios in real time of what happens if the market rallies, what happens if the market drops, what happens as we go over the course of the day. And this allows you to forecast again how those hedging flows are going to come in uh and impact the market. So let's check check out a couple of examples here. Um, one of the uh most interesting things that has happened was in May, and I know that's about 3 months ago now, but it was such a fascinating example uh of driving order flow around a big news event. And often times, you know, especially if you're in the macro space or you're a fundamental or technical guy, that's how you look at the market, right? It's through that lens. And when you're a macro person in particular, it's sort of like you have an event that takes place, but you can't really tell us how big the order flow

15:32 was. And if you're technical, you know, indicator, it's like this line crossed this other line, so that means something happened. Uh, but with the options order flow, we can tell you in real time, right, how many positions are left, what was the actual dollar impact of that position that shifted, right? So there's not really like guesswork with that. You're actually seeing the data on the screen. You're seeing what the positions are, etc. And so the reason we love this example is because many of you may have seen this before if you're a spot gamma subscriber, but if you're new to this, this was the day that there was an allegedly failed treasury auction or very poor treasury auction at least. And right here is where that treasury auction took place. And the bond people said it wasn't that big of a deal. Equity people said it has to be a big deal. But the market definitely dropped at that exactly at auction time. And

16:18 what caught our eye was this really big position at 5875. And you can see it here. There's over 9,000 zero DTE contracts at that strike. And this was something that we flagged in the morning note because we looked at trace and said, "Hey, this is a pretty big position." Again, you can see it 99th percentile strike. And when you see a 99th percentile strike, what that is really telling us is there is a lot of liquidity in that zone, right? Or at that strike. And if you've been trading for a while, you know that the market tends to move to the biggest pockets of liquidity. It's just like a big magnet, right? And sometimes that liquidity is higher and sometimes that liquidity is lower, but the market tends to be attracted to that liquidity. So in this case, what happened is you get this weakness. And if you're looking at this map, this is the gamma map. What you see

17:05 above here, right, is negative gamma. Negative gamma all in this huge zone. As we've said several times here, red in the gamma map means high volatility. What does that mean? The market should move fluidly through this level because it's red. And then where does the map turn blue? Where should it be supported? Right here, right? 50 uh 5780, excuse me, 58.880. So, what you see here is we don't know what's going to happen, right? At the moment this treasury auction takes place. No one knows if the treasury auction is going to be good or bad or how the market will react to a good or bad auction. What even is a good or bad auction? Turns out macro people don't know. But what I do know is if then right if we get some weakness there's a lot of

17:52 room for the market to drop because of this negative gamma position and there's this huge liquidity pool so to speak at 5875. So you can put these two things together. Market gets weak. Uh-oh. Looks like the auction was weird. I know I have negative gamma below. I know that the only major level to the downside is that 5875. I also know that that 5875 is the driver of all this negative gamma. Right? This is what the data is telling me because this negative strike here tells me the market makers are short these puts. I know there's zero DTE contracts and I know there's 9,000 of them. So, I have a target strike 5875. I have the red gamma above tells me that the market's fluid through there. So, I can put those two pieces together and then I was given a trigger. Didn't know

18:38 the trigger was going to come, but I was given the trigger in the auction and down goes the market. So, I can put those two things together. Now, the second one is okay, let's say that I didn't catch this drop, right? I wasn't positioned before, but now that I have the drop, when do I want to put myself in the market? When do I want to think about buying the dip? Or if I was fortunate enough to be short, when would I think about covering that short position? How do I then take a a a position or how do I do I then uh react right to the decline? Well, look what happens here at 5875, right? The market hits that level. It trades just through it and it bounces at the blue area on our map, which is right here. Right? That blue area really didn't change from

19:25 120 and this is 240. Right? So, there's a pretty good amount of time that shifted here. that blue support zone was the same position there. Um, so that was one excellent sort of guideline. But then what happens in real time cuz again the the positions update every 10 minutes. What you see is right at this time and we did a we we did an actual video of this. You can play this back in real time. If you're a spot gammer subscriber, you can actually go back to this day and replay this day if you'd like to. You'll see right here the trader starts to close their put position. So the dealer at this moment right here is short 9,000 puts doesn't like that, right? They got to hedge by selling futures. They're they're behind. They got to catch up by

20:11 shorting. And then what happens is when the market collapses into that strike, the trader who was long those puts, probably pretty happy about it, starts to close that position out. And the result of that closing the position out, you can see that here's a full blue bar. I apologize. It's a little tough to see, but here, right, the blue bar is only that big. There's a big kind of naked candle there, a big wick, I guess they like to call it. So, when that trader starts to close their position, the dealer can start to uh to uh buy back their short hedges. And what happens? The market bounces, right? And that's the low of the day as they close those positions. And you can go back and tick for tick, you can even break this down by looking at time and sales on the day and see exactly when they closed that

20:56 position to the second. And that is what exactly supported the market. Now, if you didn't have this data, you would number one, 5875 would be of no uh would not be in your sort of psyche at all, right? If you didn't know that was a big options position. Number two, if the market started bouncing there, you'd be like, why are we bouncing? And then you would I need a narrative here, right? Oh, maybe the auction wasn't so bad or I don't know, someone tweeted blah blah. All all nonsense, right? Because you can time stamp like the kids say, we got the receipts. This is where the position got closed. The this was the position that was called out before the market opened. You could see the position there the whole time. You can see the position being closed in real time, and you can see that's where the market starts to bounce. Not only that, we tell you it's a 99th percentile position. So, you know it's one of the biggest positions there is. So, you got the statistics, you got the data, you got the the everything,

21:42 right? not some lucky forecast. It's like if then statement. If we drop here, that's the 99th percentile strike. It's the big magnet. If they close that position out, guess what? That position starts to relieve the pressure on the market. So, here's a couple of other recent examples. Now, we've talked a lot about this idea of of gamma, right? Gamma is a way of telling you how much delta heads have to change as the stock price moves around. But there's another interesting metric that we have here and it's called charm. Why does charm matter? Because charm tells us where the price pressure is specifically for zero DT options in particular going into the end of the day. Now charm is related to time decay. And as you all know zerodt options have the highest level of time

22:28 decay particularly when you start to get in the end of the day. And so what's value about about the charm map is that you get these very intense flames right of red and blue. And that's telling us where the buying and selling pressure is heaviest related to time decay. And so you end up with these equilibriums all the time where here are the big zero DT positions. This is where the S&P is trading. And when you see dark red here, selling, right? Red sell, high volatility, etc. Blue or purple buy, support, easy map. And what happens? The market finds that equilibrium. And you see this type of thing happen all the time. Particularly when you look at like a captain condor position for example where that time decay, right? It like guides you. It's like a funnel. It kind of funnels you in. Why? Because that decay is getting more intense into the

23:14 end of the day. There's more to sell above. There's more to buy below and you kind of end up sandwiched or funneled into these price levels that have the giant positions. And so again, you can go back and look at big positions historically and see exactly how this works. But you'll see this kind of pinning flow all the time. And the cool thing about this is that it allows you to set up really interesting trades. Call flies or put flies in the zero DT space where the riskreward can be really phenomenal. You'll pay maybe 50 cents or a dollar for S&P spread that might make you 10 bucks if you're right. Right. It's a really great positively skewed return around a lot of these trades. And also, if you're trading in futures and you're like, "Hey, what's my price target? Should I expect a 5% rally or a 1% rally or a 10 handle rally?" Well, if you know that the hedging flows are going to kind of dictate the price action, then you can sort of step in and

24:00 say, "Okay, I'm going to take a short swing here, try to get 10 points, right? 10 handles uh in S&P, and that's all I'm looking for." Whereas, if the map is saying, "No, like we're wide open to the upside." Well, then maybe I'm going to go for like a 1% rally, right? So, using this data can really help you to manage your risk, uh set up effective riskreward trades, and then take advantage of uh all those positions that are laid out. Now, for those of you who uh are spot gamma subscribers, uh we love you. Uh we talked to a bunch of you yesterday and two days ago, I guess, in the uh Spot Gamma Q&A, and we back tomorrow with the Q&A. Uh and we really appreciate all of your uh support. Um if you are new to spot gam, we recommend you check check out Alpha. Alpha is uh the membership that gives you access to trace and a

24:46 bunch of other tools that we talk did not talk about today, including hero um which is one of our other marquee tools. But if you join uh in spot gamma today and sign up for alpha, you'll get the daily notes that we mentioned before. You get access to here and a bunch of other tools that help you to uh set up nice swing trades or other things in single stocks. You get access to uh trace which we talked about today and then all of the equity hub. Equity hub has been updated with uh our spot gamma open interest. It's our kind of we call it our synthetic positioning. So that's our custom buy side positioning in all US listed stocks. And that just gives you the most complete picture there is. As far as I know, we are the only group that has this data, right? Has all of this data across all single stocks that tell you exactly how hedge funds are likely positioned. And that just gives you a tremendous amount of edge, right?

25:32 And that's why we uh are all here. And so, please go and uh check out the alpha membership. Uh Matt, I know you have now ped back on. So, I will pass some time to you briefly before I take some questions. >> Okay. Thanks, Brent. So, uh, there are hundreds of you on here, which I'm really excited to see just to have a balance. This is our fifth session again of sharpen your skills. So, Brent's going rather quickly through the overview of trace. Some of you have said some parts are confusing or trying to understand how things really work. If you go to, and I put this in the chat, and I'll put it again uh right now. It's www.spotgama.comsabus. This page has free open tutorial videos

26:18 on how to use any of our tools. And there's a section on trace which we'll walk through. Again, we went with a very simple color scheme of blue good, red bad. So on the gamma lens, more blue means less volatility, steadier markets. More red means higher volatility. On delta pressure, that's a directional indicator. So where you see the blue, there's more buying pressure and the red is more selling pressure. And then the third lens of charm really helps into the close at the end of the day. I like to use that an hour or two before the regular hours close, 2 to 3 p.m. Eastern, where you can see how trace is starting to zero in on a certain level, usually between a blue and a red zone for the close. And that again can help, as Brent said, uh doing different uh

27:04 closing things. Uh I think Wicker just helped if I had a typo. I misspelled the word syllabus as I'm talking. Thank you, Wicer. And then also for all of our videos, you can see those related to, if I can spell the word, sharpen your skills properly. This will be posted along with all the previous videos are up there from other sharpen your skill sessions. So Brent's now going to take the questions that are in the Q&A box. If anybody has questions, please put them in. Brent, a couple that are shorter came in as you were talking, so you may need a little context what it means. Uh, but there's four or five questions in there now. If people have more questions, please populate them. And then Brent, you may want to start with a live look and then go to that or either way your call. But thanks for being with us. >> Yeah, thanks everybody. So, uh I know I tend to go through things a little bit quickly and we also sort of lean on the

27:50 fact that you may understand gamma pretty well here. Uh so I will go through the live chart now and just show you how they'll use this chart in real time. This is something we do a lot uh in the spot gamma Q&As's and I'll make sure to get all your questions, but we can talk about it in real time, right? Um, so Jay, first let's be clear about the zero zero DTE toggle. Uh, Jay says he doesn't understand the toggle. For example, um, at 65 X 6350, there's 63 million in positive gamma on the calls. And if you toggle it all, toggle off the ZDT, the numbers change. Okay, so let's talk about this toggle. When I toggle this back and forth, you'll see the positions change quite slightly, right? What is this doing? When I if I turn zero DT on, it's only showing me the gamma. That is the gamma the GEX positions in this bar chart for zero DTE

28:38 only. Remember zero DTE is almost all of the positions in the S&P on any given day, right? Not always, but on a typical day kind of boring low-key day like today, it's going to be most of it. Why? 60% of the volume. And gamma, again, highest for at the money options as we get closer to expiration. So, if you're looking at the gamma space, most of the gamma is going to be zero DTE. When I turn off the toggle, you'll see that the at the money positions, that is the positions around where the S&P is trading, which is right here. It's these candles. You can see right here, right? Almost all of that is just zero DTE. How do I know that? Because the map doesn't change when I toggle it back and forth. Zero DTE on. These are all the positions. I know they're zero DTE because that's what the time is on or the setting is on. I turn it off. These

29:23 positions hardly change. Why? because most of the gamma is related to zero DTE. If you look here at the out of the money positions, these positions have more gamma. They have a little bit longer to expiration, right? So you'll see those out of the money positions actually have gamma associated with them. And the reason that to me is important is because zero DD positions matter for today, right? They have an impact on today. The shift of those positions matter for today. If I know the position or the the market is being influenced by positions that don't expire for another two weeks, I take a lot of different information from that. Let's say that the market started crashing today because someone bought a bunch of puts, but they're zero DD puts. Well, then when the market closes and those positions are gone, then the pressure should be gone, right? It should be alleviated. However, if

30:09 it's a someone bought a whole bunch of puts that expire in two weeks, that pressure is going to be there for another two weeks, right? Because that's persistent hedging flow. That those hedges related to those positions don't go away for two weeks. Make sense? Hopefully. So, Jay, it's a great question, but that's what the difference is, right? You toggle this on and off, and the bars over here adjust only to that setting. The map itself only ever shows everything. So, it's incorporating the fact that it's zero DT positions in there. It's incorporating the fact that there's all expiration flows that are in there, right? But the heat map is going to adjust related to what the flows are. So it's sort of embedded that zerodt is the most important in the map because those are the positions that hide the highest gamma. For example, so Matt had mentioned uh charm, but let's just go

30:56 back to the gamma map and look at what we see right now. I mentioned earlier, right? 99th percentile strikes are the most important. So if I hover over this position right here, what do you see? 99.05. That's the last 30 days. That's one of the biggest uh strikes there is. So that's the 6350 strike. that has $81 million in gamma at that strike. And look what's happening just below it. That's a 98th percentile strike. It's not 99th, but what you can see here, and if I zoom in a little bit on this, you can see that some of the position has been closed, right? See this right here? So, if I hover over this, I can see an hour ago it had 67 million in gamma. Now, it only has 38 million in gamma. Why? Somebody closed the position up. So

31:42 when the market was rallying into this area, you can see that was the biggest strike on the board. 99th percentile gamma. And then what happened here is we edge a little bit forward. The market topped out. Somebody sold a bunch of position uh sold a bunch of positions here. In other words, this gamma strike grows and then someone starts closing this one. So it looks like what they did is they rolled up. See that? And coincidentally, in this time, the market starts to top out as that 6340 gets closed out. See that positions right here? We hit the 99th percentile strike.

32:27 This one under here gets closed and you see the market react by selling off. And you see this kind of thing happen all the time where the biggest positions, right, they'll get they'll get closed or moved and then the market has a reaction. Now, it's not a 50 handle reaction, but suddenly you can see, oh, these positions are in the driver's seat because when they get closed, the market comes down, right? If the position builds above, that's where the resistance is. And you see that stuff overlay all the time. So, if I'm trading this right now, I'm saying to myself, what what is my number one sort of forecast or or or idea or bet here based on the information I currently have? Number one is this is the biggest zone of resistance, right? This strike again, not as big as it was in the morning, but now this is the 99 percentile strike at

33:13 50. I have no reason to think the market's going to go above that level. Now, if Trump announces the best trade deals and and and a Russia peace deal or agreement, then okay, like bets are off, right? Because something fundamentally changed. But all else known, I don't think the market's going to go above that level. So, if I'm long futures here, you know what? I think I get five handle rally out of this thing, right? Right now, um if I'm selling call spreads, well, I'll think about selling them up here, but I'm not going to sell maybe in here or below this position, right? And do I want to be short this market at the moment? Well, what do I see around where I where I'm at? It seems like the market's pretty well supported in this zone, right? The map is blue all the way in this zone and or purple. And if I

34:00 break below this area 6325, you can see the map gets red. So, I would be interested in shorting if we got down there because the red map suggests negative gamma. What does that mean? That means if the market starts to go down, then market makers will start to sell. So market makers are buying, buying, buying a little bit less and less and less. And then here they start selling. They get more aggressive seller, more aggressive seller, more aggressive as we go down. So at the moment, what am I thinking? I'm thinking we're probably just going to tread along this line with this being the high. Now Matt mentioned the charm map, right? Number one, well, not number one. You can see gamma, the highest or brightest area of gamma on my map right here is this spot tied to the 6385. So that is my big target

34:47 for where this thing is most likely to close or where the resistance is most likely to hold. If we flip to the charm map, which is again related to the decay of the market, what do you see in the current map? Well, you see that as the positions decay throughout the course of the day, right? As this position and this position decay, there's more intense buying as we get into the close, right? So, the market should have better support over the course of the day based on this map. And as we get into this area towards the close, there's some pretty intense selling. So, the best trajectory that I have for what the market is likely to do based on current positions is something like that. So, if you were going to express this as a trade, it would be like selling the 5345 straddle or something like that. I

35:33 don't know what the prices of those options are, so please don't go and do that trade. Uh, you also want to make sure you're getting paid the right amount. But that's the trade expression of what in other words, this thing likely just a pin as the charm map is telling me there's big buying below and then as we get into the close, there could be some decent selling and we kind of just pin this pin this level. Now, if this position is closed or moved, the map is going to change in real time, right? And that's going to kind of upset the trajectory of what is likely to happen. So, that's an important thing uh to take note of. Um, does it matter whether the 99% is red or blue for acting as a magnet? So, it's a great question from the dude. Uh, this is a 99th percentile position. Lately in this more relative calm

36:19 market, most of the positions tend to be blue. What does blue mean? Positive gamma or purple. Positive gamma strike. That means that somebody sold the call or sold the put, right? So if I had a and I could toggle and and and look at that, but that positive gamma is like a pinning strike. If it was a negative gamma strike in this case, like this one, then you would see that somebody either bought a call or bought a put. And in theory, that should move volatility around. Now, for purpose of this conversation, I think that those 99th percentile strikes are liquidity magnets and the market tends to move to those levels. Now, once we've hit the target of the 99th percentile strike, then you have to sort of figure out, okay, are we likely to pin or will that position get closed and shifted? If it's a blue magnet, then I think we probably

37:06 hit it and then pin, right? So, that's the idea. But if this was red, right, then I would look at that as a support or resistance level, but I would be much less apt to think that the market's going to pin to that strike because there should still be a lot of flows around it. So in other words, 99th percentile in blue means hit it and pin and then it's red. It's sort of like hit it and then that's the trade is off, right? Because we have to assess what happens kind of after that. If that makes sense. Now, some of you are probably saying, Brent, how do I know whether that's a put or a call? If we hit this toggle and we go to net OI, we can actually see what the position is behind the gamma. So, what you're looking at now is net open interest. So, what specifically is the position that's driving that gamma? If I hover over this, what we see is the gamma uh is driven by call positions. So, zero DTE

37:52 net call position is 5,400 contracts right now. And that is about the highest it's of the day. As you can see about 10 minutes ago, it was 5,700. So, it's a little bit smaller than it was. But that's telling us the contracts. And the fact that it's orange, as I mentioned before, means it's a call position. Blue is puts. And so you can see really on down here throughout the whole position is a lot of dealer put positions, right? Everything below. Now, the fact that these contracts are on this side and they're negative means that the market maker is short those positions. So if you're looking at this, what does the dealer have on right now? The dealer has on long calls, right? That's why these orange bars are to the right of this chart. So, they're long these calls. It's a positive gamma positions,

38:38 but they're short all of these puts. That's a pretty interesting position. Why? Well, some may call that a risk reversal or a combo, right? So, if I'm short the call and long the put, what this kind of infers to me is that if something does go bad, like a trade deal or something like that, and you start to break down a little bit, there are some puts down here that I'd have to worry about, right? And so if we just go back to the gamma map and see what that looks like, remember below we said, okay, up here the market's pretty well supported, right? Low volatility. And if we broke say this 6325 area, the selling gets bigger. Well, why is it getting bigger? It's because of these put positions, right? The dealers short a lot of these puts. So that is the risk of I don't know what happens today, right? But if this happens and the market slides lower

39:24 for some reason, then I really have to worry about it if we break that level. Um, do we ever slice through a 99 percentile gamma bar? Of course, you can slice through those those gamma bars. Uh, you know, nothing is guaranteed. And a lot of the way that you can figure out if we might slice through a bar by using hero. Uh, hero is a separate conversation from the sharpen your skill session, but hero is on my chart here as this purple line. So, when do I get worried that we may blow through this strike? It would be if Hero continues to do this, right? Because Hero is telling me that new positions are coming onto the market that pressures the market higher. Again, that's a different session, so I don't want to uh gloss over that too much. But

40:11 in trading, everything is statistics, right? Odds are XYZ doesn't ever happen or nine out of 10 times this happens, that kind of a thing, right? So, there is no never in trading. It doesn't always happen the same way. But as a guiding principle, I believe that these positive gamma strikes hold the market in when they're when they're that large. In fact, those of you uh who are spot gamma subscribers know that yesterday we were very clear. So, I'll just show this again. Uh talking about the big position in the market yesterday, right? 6350 resistance, 6,300 support from a zero DD position. We call him Captain Condor. And so, you can see there's the big position to the upside. futures touch this overnight and then this is the big position to the downside right so this is 7:30 in the morning we

40:57 put this note out watch those positions so what happens yesterday I can show you in the map we go to the 5th market is very weak at 9:30 as you can see here there are those positions right right here is the upside right here is the downside these are zero DT positions remember if you don't quite understand gamma hedging delta all you need to know support and resistance, right? Where are the big strikes? That's the target. So, what you see is the market opens right here. The hedging flows are negative. Again, here I'm not supposed to be covering on this topic, but just watch that purple line go down. And this is the target, right? 60. This is 6295 specifically. And the market just goes right down to that level and it's and it stops.

41:45 There it goes. Right. And if you didn't know that massive position is there, right? Again, look at what size it is. 99 percentile. If you don't know that massive position is there, then you don't know the market has huge support there. You may have been sucked into a short thinking like, "Oh man, it's over. I don't know what it is, but it's over, right?" But instead, what do we do? We hit that position. The position's there all day long. And guess what the market does? It just bumps along that position all day long. And I can tell you that, you know, a lot of times when you watch a presentation, you go, "Oh, hey, you know, this is some chart from six months ago or two years ago or whatever." It's like you can see this happen on a daily basis. And if you don't know much about Captain Condor, uh you can Google Wall Street Journal spot gamma and Captain Condor and there's a whole article about this zero DT strategy that's uh that's often

42:30 in play. And so, you know, here we go. We for forecast back to today. Well, that's the big position, right? That's 6350. And as long as that position's there, then I think the market is probably pretty capped by that, right? I don't have a reason to short it and think we're going to crash. Um, you know, do I want to sell a cheap call spread up here? Maybe. You know, I don't I don't know what the price is. I don't know what the risk of that is. But all else equal, just kind of doing one of those is what I would think would be the the odds on favorite. Uh, Tina asks, "How constant are these supports over the day? How precisely can you prospect them at the beginning of the trading day?" There's two things, right? Number one is, so if we look at the map for today, you don't know if there's always going to be a 99th percentile position in the

43:17 market. Typically, every day there is, right? But like in April, for example, things were so active there would be a 99th percentile position there one minute and then bam, it's gone, right? Why? Because someone bought a bunch of puts, market crashes, they close them, market rips, and it's just ping pong, right? When like a guy like Captain Condor comes in, he comes in the night before actually and he sells an option so we know when he'll be there. But if you look at the start of the day here for example, there's no 99th percentile position, but 60% of S&P volume is zero DTE. So at some point positions build, right? And they tend to build around where obviously the market is trading. So often times on a day, you know, you'll see, okay, no big position necessarily to to note of, right? But then what happens? The market settles in, maybe there was like a data point that got released. You know, we sort of

44:02 set up the context of the trading day and then you see those positions form. Why do those positions form after the market opens? Is because once the market opens, then you have people come in and they sell some calls above and they sell some puts below and we start to build that gamma position up and the position gets a little more mature. Uh and then you start to really see how things likely play out, right? So to answer your question, I would say one out of five days there is a start of day 99th percentile position and then like four out of five days at some point you'll have a 99th percentile position uh layout or setup over the course of the day. Um should one use trace for scalping futures or is it better to go with hero or combination of both? Um I think that you I think you can use trace to scalp futures or set them up as

44:49 targets, right? So if you're bullish on the market and you need a real price target above, right? Okay, where do I think the market could rally to if I am right here, right? Or even right here, where should I sell? Do I sell here? Do I sell here? Do I sell here? Do I sell here? Right. Well, there, right? 99th percentile. Why? When the market rallies up here, flow should change. And what Hero is doing, and I don't want to get off on the hero tangent because this is about uh this is about um trace. You'll see hero adjust at these levels that backs up the idea that it's a support or resistance level. So the combination of both is extremely powerful. That's why we offer hero built into trace as you can see here, right? And the combination

45:34 of both gives you a really clear understanding of exactly how options flows are active in the market. Um do we only pin in positive gamma? Yes. Uh I mean you can you can have low price action anywhere but the option flows are only driving uh the pinning action right in a positive gamma environment or at a pinning at a positive gamma strike. So a blue strike blue low volatility or some people call this purple uh if I really want to get people upset I'll keep referring to it as uh blue. It really gets people upset. Blue or purple pinning low volatility right high volatility lots of move. Luca, what's up? uh in charm the negative gamma increases. So when we're talking about the charm map, right? What

46:20 we're showing you on the map is the charm, right? It's not gamma on the charm map. We're actually showing you charm, which is a Greek. It's a it's a second order Greek. So the charm, which is the time decay on the day. How is the time decay impacting the market flows? What we're doing with charm is we're looking to see where we think the market will close. And we're generally going to target where these red and and blue areas meet. Why? Because if we have all purple down here, right? This suggests buying as the the decay of the day takes place. All else equal based on what I know right now, those are buying flows, right? And then above is selling flows. Well, if there's buying flows down here and selling flows here, then we should kind of hit that equilibrium. That's

47:06 what the that's what the charm flow is of the day. So that's different from the gamma flow, right? Gamma is based on price action. If the market goes down, here's how the dealer should react based on the stock market going down. If the S&P goes up, here's how the market should react, right? Positive versus negative gamma means which direction are they trading into? If you remember this opening chart right here, so on this opening chart, we talked about how dealers hedge in positive gamma. This is where the blue or the purple zone shows up, right? Or if you see a blue or purple strike, negative gamma is the red. Mike M, hey, how you doing? Good to see you. Uh, or see your name. Uh, did you

47:53 hear that correctly? Positive gamma is traders selling calls or puts and the market makers bought them. That's right. So as a trader to have a positive gamma position means that you own options. Doesn't matter whether you own puts or calls that's positive gamma. Okay? So a market maker if they are buying calls from Mike because Mike's selling them the market maker has a positive gamma position on Mike has a negative gamma position on. Right? And you would hedge differently. So that's why when you look at the GEX chart, right, we don't break out put or call on here for the gamma because it doesn't matter. You add those two together, right? It doesn't matter whe it's a put or call. You can add that gamma together. But if I'm net long calls or net long puts, I have a positive gamma position. If I'm short puts or short calls, I have a negative gamma position. The hedging is the same, right? Blue is

48:41 positive. As the market rallies here, I'm going to have to sell stock based on this. Right on the gamma position. If the market, sorry, I just did that wrong. If the market rallies in here, right, this dictates, right, positive gamma blue position, I'm selling, right? That's how I would hedge in this positive gamma environment. Why? Market goes up, I sell into that rally. It's exactly what this what this chart is telling us, right? Market rallies, I have to sell. Okay? Market cools off, I buy it back. Right? Market rallies, I sell again. Market cools off, I buy it back. If you ever looked up gamma scalping or gamma hedging, right? That's what that's telling you. Now, in this case, if the market sells

49:27 off, I'm doing the same thing. Actually, I'm going to sell into a much weaker market. Why? Because this is red and I'm directionally trading into that market. Sometimes based on the map, you could have blue below. It's not always the colors are not always the same. So, if I zoom way out on the map, right, I just made a zoom to to the highest possible level. What do you see here? Well, that zone of selling is only through here. So, if we had a catastrophicish kind of thing happen right now, right? The market makers had selling flow all the way down until about 6,200 and then 6200 you can see there's a buy zone in here, right? It's a buy zone because it's a stability zone. The market makers should trade into the market at that level. So, that's the depiction of if I zoom way out.

50:12 This is very useful because if you think about a catastrophic market scenario, right? market might crash or I'm really worried about risk. If I see a lot of blue down here, then I don't have that much to worry about. If I see a ton of dark red like this, right? Like let's say that this red was right here. I'd be much more worried about the stability of the market right now. Whereas right now, things seem pretty stable. And by the way, if you look at this gauge, right, the gauge tells you forward price movement. The higher we go on that stability line, the tighter the price action is. So specifically, this is telling you what's uh likely to happen over the next about 30 minutes. So if you have a very stable market, you know, 60 70 80%, then you should only expect about 5 to 10 basis points of movement in the market over the next 30 minutes. If we get to like 0% stability, then you

50:58 should look for about a half a percent of of movement over the next 30 minutes. So that gauge also tells you how much volatility to expect. Uh I'm on right now, this hero is set to S&P 500. You can toggle back and forth between equities and S&P 500. Uh, hey Alex from Greece. Good to see you. Uh, if we have a cluster of negative gamma um, and they're getting closer. So, what the question is is like imagine that we had a whole bunch of negative strikes here, right? We kind of do already, but imagine these are really big like this, right? And then imagine that the market tanks. So, we're down here at 3:00, right? And

51:43 this is where we are. And then all of a sudden you see these positions get closed up. If you remember before we were talking about that 63 uh 40 position getting closed and the market reacting, right? But imagine we see all these positions get closed up. So the the the candles cut in half. I would bet you dollars to donuts. So you see the market rip into the close. And the fact that those are zero DTE positions to me makes it more likely that the trader closes the position before the end of the day. So I am always on the watch for big positions being closed, particularly negative gamma strikes. So red strikes being closed before the close. So like if I own these puts, right, and the market tanked all the way down here. The market did this, I'm up a lot of

52:28 money probably on those positions. And do I really want to wait the next 20, 30 minutes to see what happens? Probably not, right? I'm probably going to monetize that position. So what happens when I monetize that position? I take the hedging pressure off and the market gets lifted. Why? Dealer was short put shorting stock. Brent closes his big put position. Dealer sitting there. I don't want to be short stock anymore. I don't have a position anymore. I got to buy those futures back. It's exactly what happened in this example here. If you remember where we covered this happening intraday, right on on that treasury day, market tanks, huge put position, zero DTE, trader goes great, I made money, close those puts, market bounces. Same thing with calls, right? Markets rallying because someone bought a bunch of calls. When they close those calls, we can often times seen see the market

53:14 fade. Uh when when is when are market makers likely to hedge? We see the hedges take place oftent times at these 99th percentile strikes and I think that is because game is highest for an at the money option. And so you have a lot of risk at the money options. I also think traders are likely to change or adjust their position when the market hits their strike. Um but in theory the two biggest well not in theory when the market opens is one time of big hedging because overnight a lot of positions shifted right market opens things start to trade you can adjust a lot of positions second time is into the end of the day uh there's likely to be a lot of positions changing as well. So those are the two biggest times a day and then if we hit the strike right then then I would expect hedging flows to also increase.

54:02 Freeman says, "Can I explain why the historical percentage is different on GEX values versus the net percentile?" So GEX is for at the money options. So it's sensitive to where the S&P is relative to that strike. Whereas if you're looking at open interest, open interest is just telling you what is the percentile of the number of contracts. Number of contracts is just based on how many contracts are bought or sold, right? On net. That number doesn't change relative to what the market's doing, right? In other words, there's 4,500 contracts open there right now, right? The market goes up a,000 or down a,000, there's still just going to be 60 or there's still going to only be 4,500 contracts there, right? As long as someone doesn't trade, but the gamma is going to shift wildly over that period because gamma is a function of not only the number of contracts are, but what is the S&P price doing, right? S&P goes up

54:49 and down. Uh, Aman asks if there's a strike below spot that has a long put and short call, the gamma tends to cancel out. Um, yeah. So, it's a it's a good question. What what Aman is basically saying is you could have a situation, right, where okay, there's a lot of positive gamma up here, but there's negative gamma down here. So, doesn't that cancel us out? And the answer to that question is yes. Um, particularly for options that are not zero DTE, right? Because when you have a blend of positions that are longerdated, then I'm sort of trading the gamma in a different way, right? I have a I have a little bit of a longer term view. The position the positions net out a little bit more. The strike space I'll say doesn't matter as much. Right? If we go

55:36 up or down five or 10 handles, my gamma is going to be pretty stable. But when it's a zero DTE position, the gamma starts to concentrate and you have more what I would call strike risk, right? So think about it this way. If I own all of these contracts, right, but they don't expire until December, then do I really care if the market goes up or down five or 10 handles today? Not really, right? Doesn't doesn't expire for 3 months. What do I really care? Right? But imagine it's 350, right? 350. Market's about to close and the market is right here. Well, there's, as we showed before, about 4,500 contracts, right? And their

56:23 P&L, the P&L of these contracts has a massive swing if the market goes up or down five five handles, right? Couple million dollars, easy swings whether the market goes up or down by that much. So on a zero DTE space, it matters a ton to whoever that trader is that might be short or long those contracts where that position closes, right? They're going to be much more sensitive to what's happening there. And so close to the close, it doesn't matter what all that looks like because that stuff is all going to expire worthless, right? But this matters, right? This this is kind of everything if you have that on your book and it's about to expire in 10 minutes. So at which case, you know, there's not going to be any balancing out of any kind of position. It's like that strike is the one that matters. Uh anonymous attendee says, "If a large

57:08 99th percentile gamma strike has a pinning effect, what does a negative strike do?" So, I've gotten that question a few times here and the the difference or the way that I look at it is imagine that we had a negative gamma strike down here, right? I don't think that this position will come into play. But if the market tanks, this is my target. So, if I'm short futures, this is where my target is. But once we hit that target, I'm likely to close out my position. Why? Because I don't know if the market's going to do that or it's going to do that. Could do either. If they close the position in particular, it could bounce quite strong. But I don't have any reason to think we pin, right? Just because it's a negative gamma position, we shouldn't pin. So that's great. Whereas in this situation, I think the market's going to go up and pin. Now, if I'm long futures and I sell

57:53 my futures, then it doesn't really matter if we hit the target and then just go sideways. Your P&L is going to be the same. If you're an options trader, how do you want to trade that? Well, you trade it a little bit differently, right? Maybe I'll put on a call fly. And this is a little complicated, but just give you guys a little insight into the idea. But then maybe I'll do a 1 by two. Why? Because if we go up here and pin these, well, that's perfect, right? These two will decay and die and my long makes max value. Whereas, if I did the one by two this way and the market tanks and then keeps going through, well, this is going to kill me. So, I'm going to structure my position a little bit different as an options trader. And that's a that's an advanced concept. I I understand that. Uh, spot gam subscribers look at that. But, if you're new here, little food for thought uh on the way that you structure

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